Deed of Trust

RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO:


LYLES DIVERSIFIED, INC. Post Office Box 4376 Fresno, California 93744 Attn: William M. Lyles, President


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SPACE ABOVE THIS LINE FOR RECORDER'S USE ONLY


DEED OF TRUST (NON-CONSTRUCTION) SECURITY AGREEMENT
AND FIXTURE FILING WITH ASSIGNMENT OF RENTS


THIS DEED OF TRUST is made effective as of April 13, 2006, by and among PACIFIC ETHANOL MADERA LLC, a Delaware limited liability company ("TRUSTOR"), CHICAGO TITLE COMPANY, a California corporation ("TRUSTEE"), and LYLES DIVERSIFIED, INC., a California corporation ("BENEFICIARY").


TRUSTOR HEREBY IRREVOCABLY GRANTS, TRANSFERS AND ASSIGNS to TRUSTEE, its successors and assigns, IN TRUST, WITH POWER OF SALE:


All that property now or hereafter acquired in the County of Madera, State of California, described in the attached Exhibit "A" (herein referred to as the "Property");


TOGETHER WITH, and including, without limitation: all of the buildings and improvements now or hereafter erected on the property; all of the easements, rights, rights-of-way, privileges, franchises, appurtenances, permits and licenses, including, but not limited to, permits to operate, emission reduction certificates, conditional use permits, and waste discharge requirements, now or hereafter belonging to, or in any way appertaining, or in any way arising out of ownership, development, or operation of the Property, or in any way necessary, convenient, or required for TRUSTOR's use of the Property, or in any way being a means of access, to said property, all water and water rights, and pumps, pumping plants, and all shares of stock evidencing the foregoing, and all machinery, appliances and fixtures for generating or distributing water, all rents, issues, profits, royalties, revenue, income and other benefits of or arising from the use or enjoyment of all or any portion of the property or the buildings and improvements now or hereafter erected thereon (subject however to the right, reserved to TRUSTOR, to collect, receive and retain such rents, issues, profits, royalties, revenue, income and other benefits prior to any default hereunder or under the Loan Documents referenced below or other evidence of debt secured hereby); all gas, oil, water and mineral rights, profits and stock now or hereafter derived from, appurtenant to, or pertaining to the property (and any and all shares of stock evidencing the same); all vines, trees, trellises, irrigation equipment, and crops now or hereafter grown on the property; and all machinery, appliances and fixtures (including replacements and additions thereto) now or hereafter erected thereon.


For purposes hereof, the term "water rights" shall mean and includes all water, water rights and entitlements of every kind or nature relating to the property or the TRUSTOR's use of the property, including without limitation: the property's overlying rights and prescriptive rights to groundwater; any rights


to import groundwater from other lands to the property pursuant to any contract, easement, or otherwise; the right to remove and extract any such groundwater pursuant to any permit or license granted by any governmental authority or agency, or by any contract, easement, or otherwise; any rights the property may have to receive surface irrigation water from any source, including, without limitation, appropriative rights, prescriptive rights, the rights to or allocation of water from any irrigation district, water district, water storage district, water company or similar entity, together with any shares of stock or other documents evidencing such rights; any rights to the conveyance, transport or storage of irrigation water, using public or private facilities, together with any shares of stock or other documents evidencing such rights, all rights that TRUSTOR may have to supply, storage or transportation of irrigation water under the terms of any contract or agreement; any drainage rights appurtenant or otherwise applicable to the property; any license, permit or similar approval issued by any government agency pertaining to the supply, use or storage of water on the property; any water inventory held by TRUSTOR directly or indirectly at any time, including water bank credits, surface or groundwater storage, or unused allocation of water supplied by any district or water company; and all rights, claims, causes of action, judgments, awards, and other judicial, arbiter or administrative relief in any way relating to water or water rights.


All of the foregoing shall be deemed to be and shall remain a part of the property encumbered by this Deed of Trust, and all of the foregoing, together with the property (or the leasehold estate, if this Deed of Trust encumbers a leasehold interest in the land comprising such property), are hereinafter referred to as the "premises";


FOR THE PURPOSE OF SECURING, in such order of priority as BENEFICIARY, in its absolute discretion, may determine:


1. Payment and performance of TRUSTOR'S obligations under:


(a) That certain Term Loan Agreement between TRUSTOR and BENEFICIARY,
dated concurrently herewith (the "Loan Agreement"), evidencing a term loan
made payable to BENEFICIARY, in the original principal amount of
$5,100,000.00; together with the payment of interest on such indebtedness
and the payment of all other sums (with interest as therein provided)
according to the terms of the Loan Agreement; and


(b) Any and all amendments, modifications, extensions or renewals of
the Loan Agreement;


The Loan Agreement, together with all other instruments and documents
executed in connection with the transactions contemplated thereunder,
including this Deed of Trust, together with any and all amendments,
modifications, extensions or renewals of such documents are referred to
below as the "Loan Documents";


Some or all of the indebtedness secured by this Deed of Trust is subject to
variable interest rates which may increase or decrease from time to time
during the pendency of the obligations secured by this Deed of Trust and
all interest which accrued shall have the same priority as the funds
initially advanced;


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2. Payment of all other sums, with interest as herein provided, becoming due or payable, under the provisions of this Deed of Trust, to TRUSTEE or BENEFICIARY;


3. Due, prompt and complete observance, performance and discharge of each and every condition, obligation, covenant and agreement contained in this Deed of Trust, the other Loan Documents, and any document or instrument modifying or amending this Deed of Trust or the other Loan Documents; and


4. Payment of such additional sums (with interest thereon) as may hereafter be borrowed from BENEFICIARY, or its successors or assigns, by TRUSTOR or the then record owner of the premises and evidenced by one or more instruments (other than the Loan Documents) which are by their terms secured by this Deed of Trust.


5. TO PROTECT AND MAINTAIN THE SECURITY OF THIS DEED OF TRUST, TRUSTOR AGREES:


(a) Payment of Obligations When Due. TRUSTOR shall promptly pay, when
due and in lawful money of the United States of America which shall be
legal tender for public and private debts at the time of payment, each and
every indebtedness and obligation for which this Deed of Trust has been
given as security as provided hereinabove; and TRUSTOR shall promptly
perform, observe and discharge each and every condition, obligation,
covenant and agreement for which this Deed of Trust has been given as
security as provided herein.


(b) Maintenance of Premises. TRUSTOR shall maintain and keep the
premises in good condition and repair and shall not commit or permit waste
of the whole or part of any item consisting of a part of the premises,
TRUSTOR shall not alter, remove or demolish any building, improvements,
plantings, machinery, equipment, appliances or fixtures now or hereafter on
the property without the prior written consent of BENEFICIARY.


TRUSTOR shall promptly repair, replace or restore (in good, workmanlike
manner and in compliance with all laws, ordinances, governmental rules and
regulations, easements, agreements, covenants, conditions and restrictions
affecting the premises) all buildings, improvements, machinery, equipment,
appliances and fixtures now or hereafter on the property, in the event of
damage to or destruction of such buildings, improvements, machinery,
equipment, appliances and fixtures.


TRUSTOR shall perform, in the vent all or any portion of the premises
constitutes a leasehold estate belonging to TRUSTOR, each and every
obligation of TRUSTOR under the terms of the lease agreement relating to
the demise of the premises.


TRUSTOR shall not commit, suffer or permit any act upon the premises in
violation of law, ordinance, governmental rules and regulations, easements,
agreements, covenants, conditions and restrictions affecting the premises
or use of the premises.


TRUSTOR shall cultivate, irrigate, fertilize, fumigate, spray, prune and do
any other acts which from the character or use of the property may be
reasonably necessary, and if the property is agricultural property, TRUSTOR


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shall farm and harvest, and prepare for farming and harvesting, the
property in an approved and husbandmanlike manner in accordance with the
highest standards in the area.


In the performance of all acts required to TRUSTOR under the above
paragraphs describing maintenance of the premises, TRUSTOR shall promptly
pay when due all expenses incurred therefor and shall promptly pay,
discharge or otherwise release all claims for labor performed and materials
furnished therefor.


(c) Insurance. TRUSTOR shall provide, maintain and keep policies of
insurance (with companies and in form, content, policy limits and terms
satisfactory to BENEFICIARY, with loss payable to BENEFICIARY) insuring the
premises against: fire (with an extended coverage endorsement), public
liability, loss of rents or business interruption, flood damage (if the
property is located in a flood hazard area and if such insurance is
available) and such other hazards and coverage, including earthquake, as
BENEFICIARY from time to time may reasonably require.


TRUSTOR shall promptly pay when due all premiums for such insurance, shall
deliver copies of all such insurance policies, renewals of such policies
and premium receipts therefor to BENEFICIARY, and shall do all things
necessary to obtain prompt settlement or disposition of any claim or loss
covered under such policies. All such policies shall name BENEFICIARY as an
additional insured and shall include such endorsements as BENEFICIARY shall
deem necessary to protect its interest in the premises. All such policies
shall not be cancelable nor subject to substantial change without at least
thirty (30) days prior written notice to, and approval by, BENEFICIARY, and
BENEFICIARY shall receive at least thirty (30) days prior written notice of
the termination of any such policy.


Without waiving or curing any default in the performance of any obligation
under this Deed of Trust and/or without waiving notice of any such default,
BENEFICIARY may, in its absolute discretion: apply the proceeds of such
insurance upon any indebtedness or obligations secured under this Deed of
Trust; and/or in such order, in such manner and according to such terms and
conditions as BENEFICIARY may determine, release all or portions of such
proceeds to TRUSTOR for the repair, replacement, or restoration of the
premises.


(d) Payment of Taxes and Assessments. TRUSTOR shall pay and discharge,
at least ten (10) days prior to delinquency: all taxes, assessments and
charges of every kind and nature (including real personal property taxes);
all general and special assessments, including common area maintenance
assessments and assessments on appurtenant water stock all levies and all
permit, inspection and license fees; all water and sewer rents, connection
fees and charges and all other public and private charges whether of a like
or different nature) imposed upon or assessed against TRUSTOR or the
premises, or any part thereof or upon the revenues, rents, issues, income,
or profits thereof or upon the inventory of goods maintained or stored
thereon or therein. TRUSTOR shall, within ten (10) days following such
payment or discharge, provide BENEFICIARY with receipts therefor.


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Notwithstanding the foregoing, TRUSTOR shall have the right to contest the
validity or amount of any such tax, assessment or charge; provided that he
validity or amount thereof is contested diligently and in good faith and
provided further that TRUSTOR shall protect the premises against any lien
arising out of any such tax, assessment or charge, or out of any such
contest thereof, by obtaining a bond, in form, substance, amount, and
issued by a surety, satisfactory to BENEFICIARY.


(e) Litigation. TRUSTOR shall appear in and defend any action or
proceeding purporting to affect the security of this Deed of Trust and/or
the rights and/or powers of BENEFICIARY and/or TRUSTEE hereunder, and
TRUSTOR shall pay all costs and expenses (including costs of evidence of
title and attorneys' fees) in any action or proceeding in which BENEFICIARY
or TRUSTEE may so appear and/or in any suit brought by BENEFICIARY to
foreclose this Deed of Trust, to enforce any obligation secured by this
Deed of Trust and/or prevent the breach thereof.


(f) Performance of Obligations by Beneficiary or Trustee. Should
TRUSTOR fail to make any payment, perform any obligation or do any act set
forth in or secured by this Deed of Trust, BENEFICIARY or TRUSTEE (at the
request ...